I’ve recently seen the idea floated around that moving to a linear reward curve was a bad idea. I’m writing this post to help open up the discussion and discuss why I think going back to the old rewards curve is a very bad idea.
For those unfamiliar with the reward curve and Steem voting system, here’s some elementary background information on what it all means. When Steem was first developed, the creators wanted to find a way to prevent abuse of the system. If everyone had an equal vote, one could create many fake identities, use those accounts to skew voting, and distribute a large portion of the reward pool into undeserving hands.
Vote manipulation is already a problem on platforms where users aren’t paid, God knows how bad it’d be on a system like Steem. Thus the “One Steem Power, One Vote” system was born. Now, each user doesn’t have the same vote. The power of your vote depends on your stake in the system.
The creators took it a step further to counteract abuse. Operating under the (probably true) assumption that it’s easier to police a few significant instances of abuse than it is to police many smaller abuses, the ^2 reward curve was instituted. There were other reasons for the ^2 reward curve, but I don’t think they’re relevant enough to go into in this post.
What does ^2 reward curve mean?
Math. When we start talking about it many peoples’ brains shut down and drown it out. This concept isn’t that difficult to grasp, so bear with me.
Those of you deeply familiar with Steem will say “your summary doesn’t even mention RShares and this and that.” Yes, absolutely, I deserve that rebuke. For simplicity’s and brevity’s sake I’m going to try to keep things a bit more basic.
^2. Basically, it means that the more Steem Power (SP) that votes for that post, the value of the post increases exponentially.
For example, a post with 1000SP worth of votes will be worth 100X more than a post with 100SP of votes, despite only having 10X the votes. A 10000SP post will be worth 10,000X that of 100SP post, despite only having 100X the amount of votes.
Under ^2, the value of your vote may only be worth $0.01 on an unvoted post, while your vote is worth $2.00 on a post that’s already at the top of trending.
What does a linear reward curve mean?
It bothers me a little that people call this a curve. Linear means it's a line. When it's a line it's no longer a curve. But I digress.
Under a linear "reward curve," your vote is worth the same regardless of how much the post is currently worth. If your vote is worth $0.25 on a $0.00 post, it will be worth $0.25 on a $1,000 post.
What would the value of your posts look like if we went back to ^2?
A $10 post today may only be worth $1. A $50 post today might be worth $10. A $1,000 post today might be worth $10,000. Low-value posts would be worth significantly less, and extremely-high-value posts would be worth significantly more.
What are the arguments for returning to ^2?
To counteract abuse. Today, users can engage in vote collusion to relatively easily acquire a significant portion of the reward pool. Also, self-voting has become far more lucrative.
What about having upvotes on a linear scale and downvotes on a ^2 scale?
I think this idea has a lot of potential. The larger the abuse, the more power users have to counteract said abuse.
Why is it a bad idea to completely return to the old ^2 reward curve?
It will be more difficult to discover great content.
Today, someone with 20,000SP can vote on a new post and increase its value by $5. There are a lot of users with that amount of Steem Power, which means many eyes to spot and upvote great content. Increasing a post’s payout by $5 really helps the visibility, and it only takes a handful of votes from these dolphins to make the post highly visible.
However, if we were to go back to ^2, that same vote from the 20,000SP user may only be worth $0.20. For a post to go anywhere, a massive whale would have to discover that post. Today, considering Steem’s popularity, there are too many posts and too few whales to handle that kind of posting/voting dynamic.
It will be extremely challenging for new users to get anywhere.
This ties into the last point. It’s difficult enough for new users to gain traction and become successful bloggers on Steemit. With today’s number of blog posts to sift through and curate, combined with today’s few number of users with huge amounts of Steem Power (one of whom would have to upvote your post to make it relevant), it would be many times more difficult for new users to become successful than it is today.
Steem Power will become much less valuable and the price of Steem will show it.
How many people are going to go out and buy 1,000SP when it only increases their vote value by a penny? I can’t say for sure, but I’m confident it would be far fewer people than today. How many users are going to Power Down and sell their Steem when they see the value of their vote drop from $5.00 to 20 cents? How many people will throw in the towel and decide that owning Steem Power isn’t worth it anymore?
I think a change back to a ^2 reward curve would substantially hurt the price of Steem because it would significantly decrease the value of Steem Power.